On May 18th of this year, the US Department of Labor announced new over-time rules that will go into effect on December 1, 2016. The revised overtime pay regulations will increase the salary threshold for the overtime exemption from $455/week ($23,600/year) to $913/week ($47,476/year).
Here’s a little test for you to take to determine if you need to keep reading.
1- Do you have any employees who work more than 40 hours per week? If yes, read on. If no, you may return to your regularly scheduled programming – trust me, reading on if you don’t need to will only make your head spin and ruin your day.
2- Do those employees regularly working more than 40 hours per week make less than $913/week ($47,476/year)? If not, then congratulations! You pay your help generously and you are free to go about your business. If yes, then keep reading, because this APPLIES TO YOU!
By “you,” I mean someone who owns or trains horses and employs people to help you do that. By way of disclaimer, in this column I am not purporting to give you legal advice and if you have other kinds of businesses or employees to whom the new regulations may apply, you need to speak to a lawyer, accountant, or payroll professional about your specific situation.
But in general, the reality is that the vast majority of equestrian sport support staff will now be eligible for overtime pay – meaning time and a half for hours worked over 40/week. And the reality is that the vast majority of equestrian sport staff works more than 40 hours per week, because that’s just how we roll.
What does this mean for you?
It’s pretty black and white. You can pay your help more or work them less. Sorry, I know that’s not what you wanted to hear.
Does the “Agricultural Worker” Exemption Apply to My Employees?
You may be familiar with the “agricultural worker” exemption, and plan to rely on that to pay your hourly employees “straight-time” and avoid paying them for over-time hours worked. The thing is, even though horses live on “farms”, and “farming” seems plenty “agricultural,” there are lots of horse-related activities that the Department of Labor does not consider to be “agricultural.” For example, anything that happens at a racetrack is NOT “agricultural,” so work an employee does at the track is over-time eligible. The same applies to horse shows – a horse show groom is NOT an “agricultural worker” when caring for a horse at a horse show.
But if you really can’t stand the idea of paying your grooms overtime, and you think your employees are eligible for this exemption, here’s another little test for you to take:
1- Do you own or rent a farm? If no, then you don’t have “agricultural employees” and you owe them for OT worked. If yes, then continue with the test…
2- Do you have broodmares and foals on this farm? If yes, then congratulations! You might be a “farmer!” If not, then keep trying and proceed with the test…
3- Do you deliberately cultivate any crop on this farm that requires harvesting with man power or heavy equipment? If yes, then congratulations! You might be a “farmer!” If not, then keep trying and proceed with the test…
4- Do you have a “farmersonly.com” profile? If yes, then that’s kind of sad, but it doesn’t make you a “farmer” as far as the Department of Labor is concerned. If not, then congratulations! But you still aren’t a “farmer.”
So, you see, as much as we like to associate farms with horses and horse ownership, who the Department of Labor thinks of as a “farmer” is not necessarily the same thing as owning or renting a property on which you stable horses. For the “agricultural worker” exemption to apply, the employer has to be a “farmer” and the employee has to be performing tasks on the farm in furtherance of farming activities. This means that even if you ARE a farmer, and your employee is working on the farm, any work the employee does off the farm will count towards over-time eligibility.
Have I lost you? I apologize. This stuff is pretty convoluted, even to a lawyer like me. So, let me try to clarify:
Let’s say Ronald has a ranch on which he raises horses and grows hay. He has broodmares and foals, but he also has recreational trail horses, horses in training for competition, and accomplished competition horses. Under my test, he qualifies as a “farmer” because he owns a farm, he can see foals and broodmares when he looks out his window (raising livestock), and he grows and cuts hay (crop production). But he also has these show horses, and they are on the road with some of his employees at least 26 weeks out of the year. Who does he have to pay overtime to, and when?
The answer is somewhat confusing, because probably the employees working with the horses are not eligible for over-time pay for hours worked on the ranch. However, those employees who set foot off the ranch become eligible for over-time pay for the hours they work off the ranch.
How does Ronald figure out what he owes a particular employee in any given pay period? He hires a payroll specialist. (There is a mathematical equation that is involved, but if my math skills were better I probably wouldn’t have ended up in law school.)
What else do I need to know?
I hate being the bearer of bad news, but it really only gets worse. Because if there is one thing I know, it’s that if you are a horse trainer, you are probably not good about paperwork. I’m not being mean, it’s just the nature of the beast (I’m not judging; I’m just sayin’ — you have other strengths and talents that serve you well). Anyway, the bad news is that the new over-time regulations require you to track your employees’ time: not just for hourly employees, but for salaried employees too!
The Department of Labor is quick to say that this doesn’t mean you have to have employees “clock in” and “clock out.” But to be perfectly honest, this will be the simplest way to go. You don’t have to make everyone an hourly employee – they can still be salaried – but you absolutely have to track and document how many hours an employee works each week. (And, if you qualify as a “farmer” and you have employees who work both on and off the farm, you will have to track and document the hours worked by those employees and the location where the work was performed.) Because over-time eligibility and calculation of your payroll liability is tied to actual time worked – not some generalized estimate or average.
And to make matters really worse, if an employee is salaried, what you might owe them for overtime work can change from week to week depending on the total hours worked. There is no easy way for someone as math-challenged as myself to explain the math to anyone. Trust me when I say you should be having a payroll professional handling this aspect of your business.
My head hurts.
Can you please summarize?
Assume you have to pay them more or work them less. Assume the new regulations apply to your employees. If you really don’t like that answer, hire an attorney to look into your particular situation and give you a real answer. A payroll professional, payroll specialist, or accountant can also help you come up with the best cost-savings and creative compliance plan – because how you approach the problem is really dependent upon your unique set up and the flow of the actual numbers (in terms of what you are paying someone and how much they are working). There is no single “best” answer that you will get for free on the Internet.
Write to Krysia at firstname.lastname@example.org
Krysia Carmel Nelson, Esq. earned her B.A. from Dartmouth College and her law degree from Villanova University. In private practice, Ms. Nelson represents leading horse owners, trainers, riders, breeders, equestrian facilities, major farms, clubs and associations across all nationally and internationally recognized disciplines. A frequent speaker at industry conferences, including the National Equine Law Conference, she has taught at the Washington & Lee University School of Law in Lexington, Virginia and during the 2012 WEF she taught “Equine Law 101.” A lifelong equestrian, she still competes regularly on the “A” show circuit in the amateur hunter divisions.